Sector Spotlight: Is industrials M&A at an inflection point?

In this edition of Datasite’s Sector Spotlight,  Connor Schmidt, Regional Vice President leading our investment banking efforts in Chicago, dives into the latest on Industrials M&A.

Despite broader macroeconomic challenges, Industrials M&A activity remains steady. The market is being shaped by strategic divestitures, tariff-driven realignment, and a renewed emphasis on domestic manufacturing capabilities, prompting questions about whether the sector is approaching a major point of transformation.

Key themes: What the data shows

In the first half of 2025, North America saw nearly 2,000 Industrials transactions with over half originating in the U.S. Datasite’s proprietary data indicates strong momentum continuing into the second half of the year, with buy-side M&A activity on pace to surpass sell-side deals. Virtual data room usage for buy-side deals grew by 49% year-over-year, while project launches rose 46% compared to the previous year.

Strategic buyers are focusing on automation and AI to boost operational agility, defense and energy transition to align with evolving policy priorities, and domestic manufacturing to reduce geopolitical and tariff-related risks.

Notably, over three-quarters of Q1 deal value came from billion-dollar-plus transactions, a clear move toward transformative deals over incremental ones.

What’s driving deals forward?

Tariff-induced valuation gaps are reshaping cross-border appetite, leading some acquirers to rethink international strategies. At the same time, strategic divestitures, particularly in advanced materials, are picking up pace as companies streamline portfolios.

Technology-driven acquisitions are emerging as a critical lever for improving both productivity and operational resilience. Meanwhile, ongoing supply chain reconfiguration continues to fuel demand for both nearshore and domestic M&A opportunities.

Private equity remains a player in the space, but firms are becoming more selective focusing their investments on resilient verticals like industrial tech and business services.

Looking ahead

Industrials M&A is transforming, with automation, defense, and supply chain resilience at the forefront of premium deal value. Success will require dealmakers to adeptly navigate policy changes, execute integrations efficiently, and remain vigilant amid economic shifts.

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